Should You Buy Viper Energy Partners LP (NASDAQ:VNOM) For Its Dividend?
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. In the past 4 years Viper Energy Partners LP (NASDAQ:VNOM) has returned an average of 6.00% per year to investors in the form of dividend payouts. Should it have a place in your portfolio? Let’s take a look at Viper Energy Partners in more detail. Check out our latest analysis for Viper Energy Partners
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is it the top 25% annual dividend yield payer?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has the amount of dividend per share grown over the past?
Is its earnings sufficient to payout dividend at the current rate?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Viper Energy Partners fare?
The current trailing twelve-month payout ratio for VNOM is 131.22%, meaning the dividend is not sufficiently covered by its earnings. Going forward, analysts expect VNOM’s payout to increase to 157.10% of its earnings, which leads to a dividend yield of 7.33%. Furthermore, EPS should increase to $1.5. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality is that it is too early to consider Viper Energy Partners as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Compared to its peers, Viper Energy Partners has a yield of 5.84%, which is high for Oil and Gas stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in Viper Energy Partners for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three important aspects you should further examine:
Future Outlook: What are well-informed industry analysts predicting for VNOM’s future growth? Take a look at our free research report of analyst consensus for VNOM’s outlook.
Valuation: What is VNOM worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether VNOM is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
